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Flashcards in variable annuities Deck (17):
1

what is a variable annuity

-a retirement vehicle that can provide a lifetime income

2

how are variable annuities funded?

-funded with after-tax dollars
-money grows tax-deferred
-earnings taxed at distribution

3

earnings received on a variable annuity distributions are taxed as?

ordinary income taxes

4

advantages of a variable annuity account

-safe
-competitive rate of return
-protection against inflation
-tax deferred

5

payout on variable annuities are paid out based on?

life expectancy of owner

6

when paying into a variable annuity account, it is called the?

accumulation phase and there is no max contribution limits

7

when receiving payouts from a variable annuity, it is called the?

annuitization phase and once a plan is decided on, there is no flexibility in distribution payments

8

how are variable annuities priced?

-pricing similar to mutual fund (NAV per share and unit value calculated daily)

9

what happens to dividends and capital gains on a variable annuity?

they must be reinvested

10

what are the three options owner can chose for the annuitization phase of a variable annuity?

-life only
-life with period certain
-joint and last survivor

11

describe the life only payout option

-straight life annuity
-largest monthly payment
-check until owner dies

12

describe the life with period certain payout option

-beneficiary required
-15 year payments guaranteed even if owner dies
-beneficiary receives check if owner dies for remainder of 15 years

13

describe the joint and last survivor payout option

-involves 2 annuitants
-pays check until both annuitants die
-smallest monthly payment

14

describe what happens with a lump sum withdrawals

-all earnings above cost basis taxed
-cost basis returned tax free

15

describe the AIR

-assumed interest rate
-conservative estimate of return on investments in the separate account

16

describe withdrawal penalties

withdrawals made prior to age 59 1/2 subject earnings to taxes plus a 10% penalty fee

17

variable annuities are not suitable for?

qualified plans like IRAs and 401ks because earnings are already tax deferred